Chinese tourism stocks are flying high, thanks to a bet by investors that travelers will stick to domestic excursions due to the pandemic and also take advantage of relaxed duty-free rules.
While Covid-19 means the global travel industry is in dire straits, holiday-making inside China is recovering because the country moved fast to suppress the novel coronavirus. That has allowed China's economy to return to growth in the second quarter--and made Chinese sales a bright spot for many U.S. companies.
State-backed China Tourism Group Duty Free Corp. has surged 143% in Shanghai this year, helping fuel a 19% rise in the CSI Tourism Thematic Index, whose constituents include operators of scenic spots, travel agencies and hotels. The smaller Caissa Tosun Development Co. has gained 84%, aided by its own plans to tap opportunities in the duty-free business.
In contrast, the Stoxx Global 1800 Travel & Leisure index, a broader global gauge that includes owners of airlines, casinos, cruise lines and restaurants, has lost more than 22.9% this year.
One powerful driver of the rally is that Chinese travelers can now spend bigger sums tax-free on goods including cosmetics and mobile phones without traveling abroad.
In June, authorities more than tripled the annual limit on duty-free purchases in Hainan, the southern island province, to 100,000 yuan ($14,360) a person, and widened the program to include more products such as electronics.
Billy Ng, analyst with BofA Securities, said the changes in Hainan suggested China wanted to win market share from places such as South Korea, where annual duty-free revenues are roughly $18 billion. China is a major source of global duty-free revenues.
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